Georgian dream about cheap gas

07.11.2012 | 17:32

Results of the parliamentary election in Georgia may affect not only the political but also the economic sector of the country. Recently, the Minister of Economics George Kvirikashvili said that in the near future contracts with the Russian "Inter RAO UES" and the State Oil Company of Azerbaijan (SOCAR) may be revised. Is this a reorientation of energy policy of Georgia or just a loud statement in an attempt to impress the public?

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Loud statements by the leader of the "Georgian Dream" and his associates have forced observers to pay attention to many aspects of life in Georgian society. Thus, at first Ivanishvili "could not understand" why the Armenians of Javakheti do not go to live in Armenia. Then there were almost contradictory statements about NATO and Russia. And now - a statement from the Minister of Economy of Georgia George Kvirikashvili.

Kvirikashvili believes that the agreements with SOCAR and "Inter RAO UES" are insufficiently transparent. Therefore, the existing agreement should be revised. Since it cannot be right that the investor invests in the country and wants to get the benefit for 5 years. "Investors should not violate the rights of consumers through regulatory commissions", he said. The minister also said that the review of contracts with investors should not affect the investment environment: "We are not going to drive away any investor. We want to put the just demands. It's unfair that the citizen of Georgia is paying the same price as the citizen of a developed country."

According to the expert Soltan Agayev, this statement is rather populist. First, the transparency of the contract shall be provided by both parties of the deal. So, what does prevent the Georgian side to demand transparency from its executors? Second, prices are set by agreement of the parties. Today, the price of oil and gas sold in Georgia are lower world prices. And naturally, no investor wants to sell its product below its cost. Business is business. And no revision can change their approach to the business, he said.

Commenting on the situation in Georgia, SOCAR President Rovnag Abdullayev said that whenever outside of Azerbaijan the Company has worked, it always adheres to all the points of the contracts, and considers the Georgian market a strategic. "Our investments - this is not just assets of some company. They are conditional on the strategic interests of Azerbaijan, supported by political and economic bilateral relations between our two countries", Abdullayev stressed.

Abdullayev notes that SOCAR signs international contracts based on British law, and all the disputes will be resolved through international arbitration. In addition, Azerbaijan and Georgia have adopted an intergovernmental agreement on investment protection.

"As for the loud statements of Georgian politicians, it is nothing but an attempt to make political gains in the country and attract the attention of international players", said Soltan Agayev. The coming to power of Mikhail Saakashvili was also loud, and due to deliberately proactive steps of his team the building of pipeline "Baku-Tbilisi-Ceyhan" was delayed and the company BTC Co. had to allocate additional funds for social and "green" projects. And now the government of Ivanishvili, trying to immediately attract the masses, speaks of the imminent price drop for gas, power and motor fuel. "It can be done. However, instead they should provide investors with a "tax vacation" in other projects. Otherwise, for example, 700-million investment of SOCAR in the construction of carbamide plant in Georgia will remain on paper until improvement of the business climate. Besides all of this will necessarily affect the investment climate in Georgia", said the expert.

In the meantime, SOCAR is expanding business in Georgia, and there is no problem with the new government of the neighboring country. Such was the statement by the CEO of the State Oil Company of Azerbaijan. Abdullayev said that SOCAR was actively working on the gas market in Georgia. State Oil Company has recently acquired the company "ITERA-Georgia", absolute "daughter" of the Russian ITERA International Energy LLC. Following this transaction, the company SOCAR Georgia Gas actually controls the gas distribution throughout Georgia except of Georgia. The implementation of the energy projects in other areas is being carried out.